Why is the Wesfarmers share price dipping on Monday?

Wesfarmers shares are falling, but here's why investors will be happy about it.

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published February 20, 2023 2:28 pm AEDT

It's been a fairly disappointing start to the trading week for the S&P/ASX 200 Index (ASX: XJO) so far this Monday. The ASX 200 has slipped by around 0.03%, albeit having broken even more than once throughout the trading day thus far. But the Wesfarmers Ltd (ASX: WES) share price is seemingly doing far worse.

Wesfrmers shares look like they are having a shocker today. The industrial and retail ASX 200 conglomerate closed at $51.09 a share last Friday. But at present, Wesfarmers shares are going for $50.46 each, down a hefty 1.23% from last week's close.

But shareholders need not despair at this apparent underperformance of the ASX 200 today. That's because Wesfarmers shares are falling for what is probably the best reason to have a sharp drop in value – the company has traded ex-dividend today.

A happy investor sits at his desk in front of his laptop and does the mexican wave with his arms to celebrate the returns from his ASX dividend shares — Image source: Getty Images

Wesfarmers share price drops after trading ex-dividend

When an ASX dividend share declares a dividend payment, it also must include an ex-dividend date. This is the date that cuts off eligibility for the new dividend. If investors hold the shares before the ex-div date, they get the dividend. If investors buy the shares on or after the ex-div date, they don't. It's as simple as that.

Because a company's shares become nominally less valuable after going ex-dividend, it is normal to see a big share price fall when the shares do trade ex-div. This is what is happening with Wesfarmers shares today.

Thus, if an investor buys Wesfarmers shares right now, they would not be eligible for this round of dividends and will have to wait for Wesfarmers' next dividend for their first paycheque.

So how much are Wesfarmers investors in line to receive from the company's latest dividend payment?

Well, it was only last Wednesday that Wesfarmers reported its latest earnings, covering the six months to 31 December 2022.

Amid rises in revenue, earnings and profits, Wesfarmers also declared an interim dividend of 88 cents per share, fully franked, for the first half of FY2023. That was a pleasing 10% rise in the interim dividend of 80 cents per share from last year.

This payment will be arriving in eligible investors' bank accounts next month on 28 March.

Combined with Wesfarmers' last final and fully franked dividend of $1 per share, Wesfarmers now has an annual dividend of $1.88. On today's pricing, that gives the company a dividend yield of 3.73%, or 5.33% grossed-up with that full franking.

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